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SPENDING TRENDS SET THE PATH

Doug Hargrove, Chief Officer Torex

There is immense pressure on all retailers, including those operating franchises, to invest in a bewildering range of technologies – both to gain competitive advantage, and to safeguard their bottom lines. But with the high street experiencing difficult times and the gloomy economic outlook, budgets are tight and many retailers are feeling the need to cut back on all aspects of spending.

The retail industry’s analysts, Martec international, recently released a very interesting report, which examines the views and spending of the uK’s 100 leading retailers on the technology at the top of their priority list. With combined annual sales of over £170 billion and encompassing over 50,000 stores, the ‘it in retail’ report is a good source of guidance on the most significant technology retailers need to adopt, helping them to tackle this dilemma of cost versus performance.

What bears out most strongly from the report is that the retail industry is spending cautiously but wisely, primarily in areas which will bring a demonstrable return on investment - streamlining processes and exploring new sales channels. arguably the most significant area where retailers are beginning to focus their attention is multichannel selling. Sales through websites, call centres, catalogues and digital tv and mobile have remained stagnant at 4.4% for the past two years, but 91% of retailers expect non-store revenues to increase throughout 2008 and into 2009.

With such a high percentage of top retailers expressing their faith in non-store sales, the tipping point of this trend is undoubtedly upon us. indeed, the latest iMrg capgemini e-retail Sales index revealed that £26.5bn was spent online in the uK in first half of 2008, equivalent to 17p out of every £1. the growing maturity of the internet, and the increasing availability of mobile broadband to the uK
population have played roles in increasing the number of retailers with transactional websites from 58% in 2008to 68% in 2008. These figures suggest that those who have not yet invested in this area may well start to feel disadvantaged in securing new business.

PoS is one area which continues to see significant investment. It is useful for those franchisors that wish to improve transactionspeeds, reduce queues and increase sales. Newer features such as integration with cctv systems and electronic catalogue system to give access to a wider range of store merchandise are making investment in PoS more attractive as a revenueincreasing technology. retailers are increasingly placing confidence in off-the-shelf products as a more sophisticated and
viable, cheaper alternative to in-house solutions. the report shows that in certain categories –
particularly PoS (Point of Sale) - purchase of off-the-shelf systems in favour of in-house solutions is growing. The move towards off-theshelf PoS shows that there are now solutions available to help retailers meet the tough demands of delivering high-quality customer service. this will come as welcome news for retailers interested in improving the customer experience but unable to invest in expensive development and maintenance to create their own solutions.

Mobile technology is helping retailers to improve productivity and efficiency. as such, companies need to take heed of the latest developments in this area. Mobile technology for retailers has seen steady recent growth: 50% of those retailers surveyed are currently using some form of mobile technology in all their stores. The backend benefits of this technology are extensive, allowing for improved stock management including stock taking, price checking, markdown pricing, and delivery scanning, making it an unsurprising choice of area in which to invest.

No report released in 2008 would be complete without mention of green issues, but the interest in environmental concerns has not yet reflected heavily in technology purchases. While green initiatives
pioneered by the likes of M & S and Sainsbury’s have hit mainstream headlines, only half of the large retailers are using technology to help reduce their carbon emissions or make their environmental footprint more sustainable. The most popular “green” technologies include server virtualisation and consolidation, and the use of energy efficient Pcs and till servers. Cutting down on power consumption is a way to save money in the long run and this has been acknowledged by the most forward-thinking retailers. Like other retailers, franchisors will understandably continue to make decisions on the most appropriate technology to invest in based on one key factor: bottom line impact. Indeed, those
franchisors in QSr will be aware that, contrary to the economic downturn, the business of fast food retailers continues to grow, leaving them more scope to invest in technology.

It is therefore likely that 2009 will see a major rise in take-up of enterprise solutions for franchisors, such as e-commerce, PoS systems, mobile and energy saving technology. I expect to see a continued increase in PoS spending to improve the customer sales experience and loyalty schemes – all of which help franchisors to improve efficiency across the industry.

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